Buying Apartment building. How to handle?....

Idpullthecurtain

I am starting this process and would value some help if people have done this before.
Im looking to invest money in an Apartment Building.  Ive found some options.  But Ive never done this.  
I understand a Multi-Unit Freehold Block (MUFB) mortgage is the way to borrow?  Id never heard of them
I guess I would set up a Ltd company for this?  
Are there any pitfalls I ought to be aware of?

Thanks for any contributions.

tacpot12

It depends on whether you want to buy more than one unit in the block, and how the units are structured. If the units are completely self-contained and you just want to buy one unit, a normal BTL Mortgage should be ok. If the units share kitchens and lounges as is common in many student accommodation blocks, then you may be forced to use a MUFB Mortgage, as a standard BTL mortgage may have conditions that means they won't lend on such properties. 

The pitfalls are: 

• high service charges with automatic/inflationary increases  
• poor service from the management that results in damage to the building fabric (including not properly managing a sinking fund to deal with major repairs) or tenant dissatisfaction
• lack of tenants (especially in areas where lots of new buildings are being built, there can be periods of oversupply) 
• difficulty selling (how many people want to buy such properties in future?)
• the usual problems with tenants, especially those that are living away from home for the first time and have never had to deal with property issues.
• the usual problems with letting agents
• the usual problems with accountants and HMRC

Why would you set up a company? Usually this is only required if you have a substantial investment to make, and it might make getting a mortgage harder. 

Idpullthecurtain

tacpot12 said:

It depends on whether you want to buy more than one unit in the block, and how the units are structured. If the units are completely self-contained and you just want to buy one unit, a normal BTL Mortgage should be ok. If the units share kitchens and lounges as is common in many student accommodation blocks, then you may be forced to use a MUFB Mortgage, as a standard BTL mortgage may have conditions that means they won't lend on such properties. 

The pitfalls are: 

• high service charges with automatic/inflationary increases  
• poor service from the management that results in damage to the building fabric (including not properly managing a sinking fund to deal with major repairs) or tenant dissatisfaction
• lack of tenants (especially in areas where lots of new buildings are being built, there can be periods of oversupply) 
• difficulty selling (how many people want to buy such properties in future?)
• the usual problems with tenants, especially those that are living away from home for the first time and have never had to deal with property issues.
• the usual problems with letting agents
• the usual problems with accountants and HMRC

Why would you set up a company? Usually this is only required if you have a substantial investment to make, and it might make getting a mortgage harder. 

Thanks for this.  Im looking at a single building where units are completely self-contained.  I believe all units dont share facilities.

Albermarle

Idpullthecurtain said:

I am starting this process and would value some help if people have done this before.
Im looking to invest money in an Apartment Building.  Ive found some options.  But Ive never done this.  
I understand a Multi-Unit Freehold Block (MUFB) mortgage is the way to borrow?  Id never heard of them
I guess I would set up a Ltd company for this?  
Are there any pitfalls I ought to be aware of?

Thanks for any contributions.

What brought you to this decision? ( before you have researched the details apparently ) 

Idpullthecurtain

Albermarle said:

Idpullthecurtain said:

I am starting this process and would value some help if people have done this before.
Im looking to invest money in an Apartment Building.  Ive found some options.  But Ive never done this.  
I understand a Multi-Unit Freehold Block (MUFB) mortgage is the way to borrow?  Id never heard of them
I guess I would set up a Ltd company for this?  
Are there any pitfalls I ought to be aware of?

Thanks for any contributions.

What brought you to this decision? ( before you have researched the details apparently ) 

Ive researched details, just not familiar with the borrowing arrangements.
Also I think Ive been misunderstood somewhat here too.  I was really asking for pitfalls in the borrowing process, rather than the logistics of the bigger picture.

This decision is based on wanting to invest money in property.

MyRealNameToo

So are you trying to buy leases within a multi-property building or are you trying to buy the freehold of the building itself? If the later the entirety of a building or part of it? As a silent investor or with all the responsibilities and obligations of a freeholder?

Idpullthecurtain

MyRealNameToo said:

So are you trying to buy leases within a multi-property building or are you trying to buy the freehold of the building itself? If the later the entirety of a building or part of it? As a silent investor or with all the responsibilities and obligations of a freeholder?

Im buying the freehold of the building with the obligations.

tacpot12

Idpullthecurtain said:

MyRealNameToo said:

So are you trying to buy leases within a multi-property building or are you trying to buy the freehold of the building itself? If the later the entirety of a building or part of it? As a silent investor or with all the responsibilities and obligations of a freeholder?

Im buying the freehold of the building with the obligations.

Ah, in which case an MUFB is not what you want. You want a commercial mortgage.